( ESNUG 595 Item 9 ) ------------------------------------------------------- [02/02/24]
Subject: 3 finance guys mock, plus 33 other readers on Cooley's SNPS-ANSS analysis
To sell ANSS for a 29% premium and at billion dollar numbers for this 29%
premium is a monumental achievement for any CEO inside or outside of EDA.
In round numbers, ANSS was selling for $295 a share closing Dec. 20, 2023
(before Bloomburg News reported on 12/21/2023 that Ansys is "weighing
options, including a sale" story) making the pre-merger ANSS marketcap:
$295 per share X 87.4 M shares == $25.8 billion ~== $26 billion marketcap
But Sassine is paying $390 a share, meaning SNPS paying $34 billion for ANSS.
Simple math
$34 billion (what SNPS is paying)
- $26 billion (what ANSS is worth)
---------------------------------------------
$8 billion premium Ajei got for ANSS
An $8 billion premium?!!!?? Ajei scored BIG TIME here!
- from Cooley's Las Vegas odds on Sassine's ANSS-SNPS merger succeeding
Hi, John,
Your analysis of SNPS' and ANSS' SW adjacencies was both insightful and brilliant.
However, your knowledge of what's reasonable to pay for a publicly traded company
in a merger is amateur at best. Aquisition premiums historically range from 24%
to 32%. Ajei did not "score big time" by getting a 29% premium for ANSS.
In purely merger terms, Ajei performed to the high side of expectations, but not
exceptionally high.
- [ A Wall Street guy ]
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We read you for your deep technical understanding of the ins and outs of EDA.
You know EDA cold.
You clearly don't know finance, though. Sassine paying $34 billion for an ANSS
with a $26 billion valuation wasn't a big time score; it was more like an average
~30% mark-up typical in mergers of this nature.
You should stick to EDA, John.
- [ An investor guy ]
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Yes, Ajei did well for the ANSS shareholders, but that $8 billion premium
was nominally expected. Otherwise the merger wouldn't have happened.
It's articles like yours is why I tell investors to leave the engineering to
the engineers and to leave the finance to the finance people.
- [ A finance guy ]
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"Holy crap! I can't believe by our CDNS bidding up ANSS, we actually
got Sassine to pay $34 billion for an ANSS that's making $2.26 billion
revenue! It'll take 15 years just to make back that $34 billion."
"Getting SNPS to pay out $34 billion for anything will seriously cripple
Sassine for all his future acquisitions for the next 10 years! Talk
about a rookie mistake!"
- from Cooley's Las Vegas odds on Sassine's ANSS-SNPS merger succeeding
Hi, John,
$34 billion might be the right price.
I don't think Sassine's Board of Directors would let him do a price that
was too outside of what's allowed.
- [ An EDA user ]
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I'm a chip verification guy.
What do I know about what's a good merger price and what's not?
- [ An EDA user ]
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It's up to Wall Street to determine if $34 billion was too much.
SNPS was $509.68 on Jan. 16, the day the merger was announced.
SNPS is $548.90 today, up 7.7% in 4 days. Wall Street agrees.
- [ An EDA user ]
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Stock analysts like Jay are the ones who use their own cash flow voodoo to
determine a fair acquisition price, not engineers like you nor I.
- [ An EDA user ]
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Is $34 billion too much?
Wall Street has their own ways of doing things that don't map to household
common sense.
- [ An EDA user ]
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Since most likely that 99% of all future acquisitions in EDA and IP will be in the
under $500 million range, no, Sassine won't be crippled for the next 10 years.
Sassine will still be competitively bidding on anything worthwhile.
- [ An EDA vendor ]
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80% chance
that
ANSS-SNPS
is a
SUCCESS
|
What I really did like is it's NOT a dumb take-the-money-and-run deal. It's NOT $34 billion in cash. It's 1/2 in $17 billion cash 24 months from now.
And 1/2 in $17 billion worth of SNPS stock from now. Because everyone has to wait 24 months for government approval.
That's the making of a very smart ANSS-SNPS marriage.
I give this an 80% chance of happening within the next 48 months.
|
- from Cooley's Las Vegas odds on Sassine's ANSS-SNPS merger succeeding
Hi, John,
Waiting 24 months before changing anything?
You just described the way a perfect merger is supposed to be.
- [ An EDA user ]
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The fact that it takes 24 months to close might drive some ANSS talent
away towards greener pastures, which should make Anirudh happy.
- [ An EDA user ]
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If only the mergers I was involved in had a 2 year waiting period built in
like that. My life would have been much less chaotic then.
- [ An EDA user ]
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Can you do me a favor, please, John?
Could you please forward this link to [Broadcom CEO] Hock Tan?
Hock could really learn from this example of how to do a healthy slow merger.
- [ An EDA user ]
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John,
When Aart acquired LAVA, it went NOTHING like this.
Why do you think there were so many ex-Magma employees who very quickly
ended up at Cadence?
- [ An EDA vendor ]
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I think slow mergers like this are the best for all involved.
It gives both the employees and the customers time to adapt to the change.
- [ An EDA user ]
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I doubt that Sassine wanted this 24 month delay, but its positive effect
will still be felt anyway.
- [ An EDA user ]
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The stupidest mergers that I've seen is where the acquired were given all the
cash up front. Of course, all the key employees left within a few months and
the acquiring company got nothing but a new logo for their money.
The customers of the acquired company got screwed over because there was
nobody left from old company to support their products.
It's good to see that ANSS-SNPS won't be like that.
- [ An EDA user ]
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80% chance
that
ANSS-SNPS
is a
SUCCESS
|
Back in 2017, when Sassine was the SVP of SNPS Design, he personally spearheaded the SNPS-ANSS EDA tool partnership
making Sassine the one guy with 7 years history working between these two companies. He knows all the key people in both companies to make a true SNPS-ANSS EDA tool integration to happen crazy super zippy fast once the SNPS-ANSS deal is approved.
Because of that, I expect the true SNPS-ANSS EDA tool merger will be completed by 2027 or probably MUCH earlier.
|
- from Cooley's Las Vegas odds on Sassine's ANSS-SNPS merger succeeding
Hi, John,
I agree. Because of his history with ANSS, if anyone is going to pull off
this ANSS-SNPS integration well and quickly, it's going to be Sassine.
- [ An EDA user ]
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This is Sassine's big $34 billion roll of the dice.
He'll make it work. Or die trying.
- [ An EDA user ]
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Yup. He's the only guy who could realistically pull off this merger.
- [ An EDA user ]
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10% chance
that
ANSS-SNPS
is a
TOTAL DISASTER
|
In next 48 months, the SNPS Board of Directors could have a whimsical change of mind and outright fire Sassine for unknown reasons.
Or the U.S. regulatory folks could put the kibosh on any SNPS-ANSS merger for whatever cryptic reasons the U.S. Government does what it does.
Or the world economy could go into a global depression where all fiat currency is worth zero and we're all standing in line at soup kitchens for our food.
Or something else totally unforseen crushes this merger
Since I'm an engineer, it makes me a pessimist by default. So to be paranoid -- and safe -- and to make sure I cover all my bases -- I give this a 10% chance of something like this happening within the next 48 months. "See? I warned you that this might happen in my report!"
|
- from Cooley's Las Vegas odds on Sassine's ANSS-SNPS merger succeeding
Hi, John,
Are you sure you didn't mean say this as a VERIFICATION engineer?
Every verification engineer thinks exactly as you've described here:
- paranoid
- obsessed with being safe
- obsessed wanting to be able to say "I told you so!"
- total disregard for realistic probabilities in order
to be safe. (10% chance the world economy crashes
into a great depression? Seriously?)
- paranoia about covering all bases no matter how absurd
This isn't a design engineer's thought process. It's a verification
engineer's thought process.
- [ An EDA user ]
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Well said.
I directly work with a dozen regression test writers.
Every day they compete with each other on coming up with ever more bizzare states
that our regression suit must cover.
- [ An EDA user ]
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Why did you write this 10% failure chance in a mocking tone, John?
Isn't a good engineer supposed to plan for all contengencies?
- [ An EDA user ]
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I doubt Sassine's Board of Directors would change their minds on this.
In fact, I suspect they directly ordered Sassine to pursue this acquisition.
- [ An EDA user ]
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Boards of Directors keep very detailed minutes of their meetings.
The SNPS Board can't just go 180 degrees on a prior decision to acquire ANSS
and throw Sassine under the bus for following their explicit directions.
Your 10% probabilty of total disaster here is both excessive and unrealistic.
- [ An EDA user ]
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I've never seen a design engineer come up with success/failure probabilities
just like you did here, John.
In fact, most design engineers that I've worked with are completely cavalier
with how their silicon masterpiece will be tested.
"Oh, the verification guys will somehow figure out how to validate my brilliant
design. They always do."
- [ An EDA user ]
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BOTH SNPS AND CDNS WINS: No, that's not a typo. I see in 48 months from today
that this proposed SNPS-ANSS marriage means that both Sassine and Anirudh
will win.
Anirudh will win because in 48 months from now he will have 9 years of his
CDNS R&D doing intense development of his own (10x to 100x) more capacity,
multi-threaded and multi-machine ANSS-equivalent tools the same internal
databases and tight integration into his CDNS Innovus/Virtuoso/Tempus design
tools. 9 years!
Sassine will win because in 48 months from now he will have ANSS RedHawk-SC,
Totem-SC, PathFinder-SC, PowerArtist, Clock-FX, RaptorH, RaptorQu, Exalto, VeloceRF
tools all tightly integrated with his SNPS Design Compiler, PrimeTime, ICC2, Fusion
Compiler, Custom Compiler tools. (But getting them all on the same internal
databases might take significantly longer than 48 months from today to achieve;
but it will be in the Top 5 of his roadmap and will eventually happen!)
- from Cooley's Las Vegas odds on Sassine's ANSS-SNPS merger succeeding
Hi, John,
My management and I are happy with this news.
As long as we have at least two rival chiplet tool flows, SNPS-ANSS vs CDNS,
directly competing against each other, it's a win for us.
We'd prefer to see a viable 3rd EDA supplier, Siemens EDA, competing here, too,
if possible.
- [ An EDA user ]
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Mergers that are marriages are great. Everyone wins.
Mergers to kill off a rival product line are brutal.
Thankfully for all stakeholders involved Anirudh did not win this bid.
- [ An EDA user ]
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48 months from now we have SNPS and CDNS in cutthroat competition over who
can provide (as you wrote) "the best-of-all-possible chip, 3DIC chiplet,
board, and system design tools."
That works for us.
- [ An EDA user ]
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Good article and good analysis. Thank you for writing it, John.
- [ An EDA user ]
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I liked how you explained how this will impact users 48 months from now.
The only minor correction that I'd add is the need for an outside neutral
3rd EDA vendor to check the intermediate steps in your 3DIC chiplet flow.
This is why we use Siemens Strato/Primo, Calibre, and Tessent to keep an
eye on our Cadence Genus/Tempus/Innovus tool run results.
- [ An EDA user ]
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Excellent article, John.
- [ An EDA user ]
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Now I understand. Thank you.
- [ An EDA user ]
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Good article.
- [ An EDA user ]
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Good article
- [ An EDA user ]
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This final screen of your post summarized everything concisely, John.
The rest was the usual Cooley bloviating to justify your thinking.
- [ An EDA vendor ]
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